- The best blue-chip stocks in this environment are those with rock-solid balance sheets.
- Electronic Arts (EA): The video game company recently booted FIFA from its video game lineup leaving it with more profits.
- Booking Holdings (BKNG): During Covid-19, consumers bought products. Now they’re buying experiences, which is good news for the travel booking site.
- T. Rowe Price Group (TROW): As the markets continue to falter, active management will attract investors.
- Moderna (MRNA): Covid-19 could be with us forever, putting the vaccine maker in the driver’s seat for cash flow generation.
- Intel (INTC): Every portfolio should have a contrarian pick. Intel is it.
- Corteva (CTVA): Food isn’t going to get any cheaper.
- Molina Healthcare (MOH): The importance of Medicaid and Medicare isn’t going away.
Investors have a right to be scared about the current state of the markets. The S&P 500 is down nearly 18%. It used to be that if you were looking for the best blue-chip stocks to buy, you scoured the index’s constituents for the ideal choices.
However, the index in 2022 is experiencing its worst year since 2008 and the third-worst since 2000. Since 1928, there have been just 10 years where the index’s annual return was -15% or worse. It’s on track to do it again.
The argument to buy the index at this point and ride the law of averages to significant returns is one possibility. However, if you’re like many InvestorPlace readers, you’re reading this to get some stock ideas.
If that’s the case, take the 500-plus stocks in the index, and whittle the list down to a manageable few. From where I sit, the flight to safety in 2022 suggests only those companies with rock-solid balance sheets should be considered at this point.
Here are seven of the best blue-chip stocks to buy now for safety.
|TROW||T. Rowe Price Group||$122.61|
Electronic Arts (EA)
Depending on who you talk to, you’ll get a different opinion of who booted whom to the curb after 20 years and more than $20 billion in sales. FIFA was seeking to double its annual licensing compensation to $300 million.
Electronic Arts, for its part, wanted to take the games to other venues, including operating esports tournaments and issuing FIFA NFTs. FIFA didn’t want to hand over this much exclusivity. As a result, starting in 2023, Electronic Arts’ franchise will be known as EA Sports FC.
“Our vision for EA SPORTS FC is to create the largest and most impactful football club in the world, at the epicenter of football fandom,” said Electronic Arts CEO Andrew Wilson.
On the upside, it won’t have to pay out $150 million each year to FIFA for what is essentially naming rights and nothing more. On the downside, it loses out on the World Cup.
With $1.2 billion in net cash and $1.7 billion in free cash flow, it’s doing just fine without FIFA.
Booking Holdings (BKNG)
Booking Holdings (NASDAQ:BKNG) will be a big beneficiary from the return of the experience economy in 2022 and beyond. According to a new travel report from the Mastercard Economics Institute, data shows that consumers are spending on experiences rather than things.
For example, according to Skift, “global tourism spending at bars and nightclubs is 72 percent over the levels recorded in April 2019, while spending at amusement parks, museums, and concerts is reaching 35 percent above pre-pandemic numbers.”
What’s bad for UPS is very good for Booking. The company recently reported Q1 2022 results that included record gross bookings of $27.3 billion, 129% higher than Q1 2021 and the highest quarterly number in the company’s history.
CEO Glenn Fogel is quoted, saying, “despite an uncertain macroeconomic environment, we have seen continued strengthening of global travel trends so far in the second quarter of 2022, and we are preparing for a busy summer travel season ahead.”
T. Rowe Price Group (TROW)
T. Rowe Price Group (NASDAQ:TROW) reported its April 2022 assets under management (AUM) on May 11. The Baltimore-based company had $1.42 trillion AUM as of April 30. Of that, $780 billion was from equities, either within its own funds or as a subadvisor for someone else’s.
At the end of April, it reported its Q1 2022 results. Although most of its financial metrics were down in the quarter due to poor markets, it still generated $567.9 million in net income from $1.86 billion in revenue.
In March, Refinitiv Lipper named T. Rowe Price its 2022 Best Overall Large U.S. Fund Management Group over three years. It also received 24 awards from Refinitv Lipper for 21 of its funds.
“We are honored and grateful that T. Rowe Price has been recognized with such a prestigious award. It demonstrates the value that our strategic investing approach brings to our clients,” said Eric Veiel, chief investment officer.
If passive indexes continue to do poorly, T. Rowe Price will regain some market share it lost when investors moved to passive investing.
If you look at a five-year cash flow statement of Moderna (NASDAQ:MRNA), you will see that it’s grown from -$459 million in 2019 to $13.6 billion in 2021.
The first thing Moderna ought to do is buy back some of its stock. Down 46% year to date, it is trading at one of its lowest points since 2020. Moderna’s board approved a new buyback program for $3 billion with no expiration date. In Q1 2022, it repurchased 4 million of its shares at an average price of $155.75. Based on its current price, its return on investment is -9.6%.
On May 11, Moderna made all the necessary submissions with the U.S. Food and Drug Administration to get approval for its Covid-19 vaccine for kids 12 to 17, six to 11 and those between six years and six months. Despite Canada, Australia and the European Union approving Moderna’s vaccine for kids six to 17, the U.S. continues to delay its approval.
Once its vaccine gets the okay, expect the profits to grow even larger.
The best way to describe Intel (NASDAQ:INTC) is to say that it is the value play of large-cap semiconductor stocks. It trades at 2.2 times sales. By comparison, Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) trade at 6.3 times and 15.7 times sales.
Interestingly, Intel shareholders recently rejected its compensation plan for its top executives. Investors are concerned about CEO Pat Gelsinger’s turnaround plan for the chipmaker. Approximately 66% of the votes were against the compensation plan.
Intel’s had very few success stories in recent years. Its non-GAAP revenue fell 1% year-over-year in Q1 2022 to $18.4 billion. Like most CEOs, Pat Gelsinger described its Q1 2022 results as a “strong start to the year.” However, its earnings fell by 35% to $3.6 billion.
The big winner in Q1 2022? Its Datacenter and AI Group. It had a 22% increase in sales to $6 billion.
Intel is a buy for patient investors.
Corteva (NYSE:CTVA) is one of the few stocks up in 2022. The agriscience company reported Q1 2022 earnings on May 4. Net sales grew 10% to $4.6 billion, $136 million higher than analyst estimates.
As for Q1 2022 earnings, Corteva delivered adjusted operating earnings of $708 million, 19.6% higher than a year earlier. On a per-share basis, adjusted operating earnings per share increased by 22.8% to 97 cents, 16 cents higher than analyst expectations and 18 cents higher than a year earlier.
For 2022, the company expects $16.85 billion in revenue and operating EBITDA (earnings before interest, taxation, depreciation and amortization) of $2.9 billion at the midpoint of its guidance.
In early March, the company announced that it moved to a global business unit model. It now has two units: Crop Protection and Seed. Both leaders report to CEO Chuck Agro. Its Crop Protection unit accounted for 45% of its $4.6 billion in revenue in the first quarter while its Seed Unit accounted for 55% of sales.
Corteva is a business that ought to do well for decades to come.
Molina Healthcare (MOH)
Molina Healthcare (NYSE:MOH) joined the S&P 500 in early March. Analysts do not heavily cover it. Of the 17 that do, eight consider it a “buy,” two rate it “overweight,” six give it a “hold,” and one rates it a “sell.” Despite having ratings all over the place, it has a median target price of $350.
Molina Healthcare provides healthcare plans to more than 5.2 million Americans in 18 states. Founded in California to help low-income families, it’s grown considerably. In 2021, its Medicaid membership was 4.33 million, or 83% of its total served.
Due to a healthy business, Molina increased its 2022 guidance for premium revenue to $29.25 billion from $28.5 billion previously. In addition, it expects adjusted EPS of $17.10, 10 cents higher than its previous estimate.
If you do your own due diligence, you’ll see that Molina’s stock has outperformed virtually all of its insurance peers over the past five years. It’s got a five-year annualized total return of 35.8%. That’s double the Healthcare Plans industry, and almost three times better than the entire U.S, markets.
MOH stock is an excellent way to play the healthcare industry for the remainder of 2022.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.